Leader: Nokia pulls an Apple

Nokia announced this week it will spend $60m on buying Loudeye, the digital music company. So what's with Nokia - the hardware, mobile phones and base stations company - going all software and services?

The Mighty Finn has been long chanting its 'we sold X million music-playing devices last quarter' mantra and there's no doubt that having a reasonable MP3 player on your phone will become as normal as having a decent camera is now.

So we can't help but salute Nokia's brave move into digital distribution - what better to way to guarantee there's a compatible service and available content for your MP3 player phones than to buy the firm that provides them? No more middlemen nicking a share of your revenue to contend with and a surefire method to keep the strategy of software and services in line with that of hardware.

A sensible move and a surprisingly obvious one in hindsight.

After all who else could Nokia have gotten into bed with? Apple? It would be the obvious choice but Jobs and co have already thrown in their lot with Nokia's arch rival Motorola so it's dubious the Finns could woo the Cupertino mob.

If you can't join 'em, mimic 'em. What Nokia appears to have done is dressed itself up in Apple's business model - nail down the hardware, such as its N-Series of 'multimedia computers' and other MP3 wannabes, then start up a software service. Make the two as inseparable as Richard and Judy and keep your fingers crossed consumers will get hooked.

And, like Apple, Nokia is a gorilla of the tech world - when you sell a third of the world's phones, you can drive a hard bargain for getting content with the sort of pricing and rights deals that customers and CFOs might like.

Microsoft is going the same way with its first foray into the MP3 player market, the Zune. Redmond is hoping to follow Apple - and now Nokia for that matter - by taking the whole end-to-end approach with digital music.

However, unlike Microsoft, Nokia already has its hardware in millions of people's hands. Now it just needs to give those people a compelling reason to use it and give the operators an equally good reason to keep buying their handsets. Nokia could become especially popular with operators if it can guarantee consumers will want to spend outrageous amounts on downloading music over-the-air to their phone.

There's still a lot about this deal that needs working out - what about Loudeye's web operations? Will mobile music die on the vine if the operators refuse to drop their download prices? But a recent analyst report found that mobile music will be a third of all downloads by 2011. It would seem Nokia has got into the market when the getting's good.